Prepare a projected cash flow for the whole business on a monthly basis for the year ended December 31, 2018;
Projected Purchases
For the purposes of the projections, a mark-up on purchases of 25% can be assumed for the Wholesale business and a mark-up of 40% can be assumed for the Retail business.
Note: a mark-up of 25% on purchases of â¬100 will give a sales value of â¬125.
Purchases are made to meet sales demand in the following month.
Analysis of employees by function in the business
Wholesale Number Salary per annum
Van driver 1 â¬30,000
Warehouse 1 â¬30,000
Sales Manager 1 â¬36,000
Administration/Accounts 1 â¬40,000
Retail Shop Salary per annum
Sales staff 2 â¬25,000
Administration/Accounts 1 â¬48,000
The sales staff earn sales commission of 10% and this is paid in the month following the sale.
Other
The Financial Controllerâs salary is projected at â¬72,000 for 2018.
There are two Directors in Green both of whom have a projected salary of â¬120,000 for 2018.
Salaries will be paid each month on an even basis in 2018.
Expenses
The following expenses are projected for the business segments in respect of 2018:
Wholesale Retail
⬠â¬
Rent – 72,000
Rates 24,000 30,000
Heat and Light 34,000 44,000
Insurance 60,000 72,000
Motor expenses 36,000 see note*
Marketing – 50,000
Administration 10,000 24,000
Motor and Travel expenses of â¬96,000 are projected for 2018 and these relate to expenses incurred by the Financial Controller and the Directors of the company.
Central expenses of an administration nature relating to Professional fees and General expenses are projected to be â¬60,000 for 2018.
All of the above expenses are projected to be incurred evenly over the projected 12 month period and to be paid in the month in which they are incurred.
Non-Current Assets
Green owns the following non-current assets and the relevant information is detailed below:
Cost ⬠Accumulated Depreciation at 31.12.16
Buildings in Cork 350,000 84,000
Van re Wholesale basis 48,000 24,000
Warehouse in Cork 100,000 50,000
Motor Vehicles 1 80,000 36,000
Office equipment 60,000 24,000
The motor vehicles are driven by the Directors and Financial Controller of the company and the Office Equipment relates to the Retail business.
The non-current assets are depreciated per annum on a straight line basis with nil scrap values:
Buildings 2%
Van 20%
Warehouse equipment 10%
Motor Vehicles 20%
Office equipment 10%
Opening position
For the purposes of preparing the projected figures for 2018, the following figures can be assumed as the opening figures:
â¬
â¬
Non-Current Assets
520,000
Current Assets
Inventory
Wholesale
28,572
Retail
12,000
Trade receivables
12,500
Bank
100,000
Total Current Assets
153,072
TOTAL ASSETS
673,072
Share Capital
500,000
Retained Earnings
132,500
Total Equity
632,500
Non-current liabilities
–
Current Liabilities
Trade payables
40,572
Total Current Liabilities
40,572
TOTAL EQUITY &LIABILITIES
673,072
Note: the NCA figure of â¬520,000 is the cost less accumulated depreciation as detailed in the note above. Depreciation is calculated on the cost figure.
Required
- Prepare a projected SOCI (Profit and Loss Account) in respect of each segment of the business and on a total basis for the year ended December 31,2018;
- Prepare a projected cash flow for the whole business on a monthly basis for the year ended December 31, 2018;
- Prepare a projected SOFP (Balance Sheet) as at December 31, 2018;
- From your studies undertaken in the Creative Capital Module, what is meant by the term liquidity and discuss why it is crucial to prepare cash flows on a monthly basis;
- Suggest ways in which Green might improve the profitability of the business.
